Month: October 2004

Deutsche’s profitability target may be a bad thing

29 Oct 2004

The German bank has used its latest results as an opportunity to ram home its commitment to achieving a 25% returnonequity next year. But the results imply that Deutsche s real problem is its unbalanced business mix. Focusing on profitability won t address that.

Sarkozy exits with bizarre E7bn Snecma deal

29 Oct 2004

There is little industrial logic in combining Snecma, an aeroengines manufacturer, with Sagem, the electronics group. But the move will protect French jobs and line the government's pocket the hallmarks of the finance minister's tenure.

Is Harmony bold or desperate?

29 Oct 2004

Either the company's management is irrational or it thinks Harmony's stock is overvalued. The miner's shareholders will give up value to get control of the Gold Fields. Optimistic synergy targets barely compensate.

Political merry-go-round spins at Repsol

28 Oct 2004

Out goes one political appointee, Alfonso Cortina, and in comes the new government s man La Caixa's Antonio Brufau. This looks like the precursor to a politically motivated bid for Gas Natural. That s not good news for shareholders.

Nortel enters last chance saloon with latest results delay

28 Oct 2004

The telecom equipment maker's accounting problems are verging on the surreal. It has now gone for 15 quarters without reliable figures. Nortel's creditors have held off pitching it into default so far. But if this continues much longer, their patience is likely to snap.

Chrysler shores up tottering Daimler

28 Oct 2004

The carmaker used to comprise a German powerhouse and an American dog. Now, things are swinging the other way. The improvements at Chrysler are welcome especially after Daimler s Asian nightmare. But turning round Mercedes is the key to recovery.

Telecoms stocks trade in circular motion

28 Oct 2004

The sector is enjoying periodic rallies on signs of forthcoming buybacks. But government shareholders are reacting to buying demand by increasing the supply of stock to the market.

Xstrata makes pre-emptive $5.4bn approach to WMC

28 Oct 2004

Mick Davis, Xstrata s CEO, clearly wants to make his company a mining major. But to date he's been price sensitive. He's trying to win over the Australian miner by making a cash approach. This may succeed, but if there's a bidding war, Xstrata may not win.

Half a cheer for China rate hike

28 Oct 2004

A 0.25% rise in interest rates won't do much to ease China s whopping 9% growth rate. But the move has symbolic value. It shows the government cares about the economy. But it doesn't do much to shorten the odds of a soft landing for this supersonic craft.

Shell goes the whole hog and unifies

28 Oct 2004

The oil and gas giant will become a UK plc with a single board, but headquartered in Amsterdam. That's much better than expected. That s the good news. The bad news is that there are still 900m barrels of questionable reserves sloshing around.

SEC proposes easing IPO quiet period rules

27 Oct 2004

The move, which would bring the US into line with Europe, would be good. The notion that less information protects investors is bizarre. Sure, there is a risk of glitzy marketing. But issuers will still be legally liable for what they say and more open to scrutiny.

Santander delivers in Q3

27 Oct 2004

The Spanish bank s latest results reinforce the idea that it can achieve revenue growth while keeping a tight rein on costs. Judging by the latest dreary trading update from Abbey, the UK bank Santander is buying, it will need these skills in spades.

Volkswagen needs a new chairman

27 Oct 2004

Ferdinand Piech is a hero to some for turning VW round in the 1990s. But he s the wrong man to head the carmaker. Piech is too dominant and too dyed in the wool to shake up VW. It is time to bring in someone new.

Warner Chilcott takes the bird in the hand

27 Oct 2004

The company has recommended a bid from one privateequity consortium, even though another hasn t ruled out an offer. The board was right not to hold out for the bird in the bush, given the takeout valuation it has secured.

End of boom in sight for Germany’s Merck

27 Oct 2004

The drugs and chemicals company has outperformed its competitors sharply this year as its promising new cancer drug hit the market. But its more lucrative chemicals business for flatscreen TVs already looks past its peak.

Unilever’s sales decline accelerates

27 Oct 2004

The consumer goods giant s leading brands supposedly the powerhouse of the business are going backwards. Unilever plans to up its ad spending to counter price deflation. So it isn t surprising that the new boss is reviewing its targets.

Royal Dutch isn’t terribly Dutch

27 Oct 2004

Only a sixth of the company is owned by the Dutch. When you look at the combined Royal Dutch/Shell, that falls to a mere 10%. This ironically may be a reason why the Dutch are reluctant to merge the two groups. But it is really a reason why they should.

WPP cautious on 2005

26 Oct 2004

The UK ad giant s forecast of slightly slower industry growth is just another reason why ad stocks face another tough year. Even European stocks may not do well. While growth in Europe may pick up, many are exposed to the US, which could be sluggish. The UK ad giant s forecast of slightly slower industry growth is just one more reason why ad stocks face another tough year.

Mittal billions prove conventional wisdom wrong

26 Oct 2004

Lakshmi Mittal bought steel assets when no one wanted them. And then he ran them better than anyone thought possible. The results have been global market leadership and huge cash flow. The company now fits the standard definition of industry leader.

Germany shelves cash-for-pensions idea

26 Oct 2004

This looks sensible. Getting cash from Deutsche Telekom and Post in exchange for taking on pensions liabilities may have looked smart. But it would only have been a shortterm fix. The government needs more sustainable solutions to its deficit.

Commerzbank to double stake in Mediobanca

26 Oct 2004

This appears to contradict the capitalstrapped bank's policy of selling down its equity stakes. So why is it doing it? One reason may be to safeguard its relationship with insurer Generali, in which Mediobanca is the lead shareholder.

BP succumbs to higher costs

26 Oct 2004

The oil and gas giant has spooked investors by upping its capex spend. What s worse, it is due to rising costs, and not new projects. BP isn t alone in finding it more expensive to run the business. But with volumes outside Russia falling, the trend can only worsen. The oil and gas giant has spooked investors by upping its capex forecast. What s worse, this is due to rising costs, not new projects. BP isn t alone in finding it more expensive to run its business. But with production outside Russia falling, the trend can only worsen.

Karstadt can’t rely on property to fund turnaround

25 Oct 2004

Investors hope the German retailer can use its properties to recapitalise itself. It could probably pay off its debts if it sold the lot. But that would still leave it with a pensions problem and a huge lease bill to service. And that looks like a tall order. But that would still leave it with a pensions problem and a huge lease bill to service. Servicing that looks like a tall order.

Mittal deals create steel behemoth

25 Oct 2004

The Mittal family is merging its two steel companies to absorb ISG of the US. The $21bn merger will produce the world's biggest steelmaker. The deal is complex and the synergies aren't huge. But the Mittals have a good record of creating value.

M&S buys back 28% of its shares at 362p

25 Oct 2004

The price determined by an auction probably allows the hedge funds that had bought stock in expectation of a bid to break even. M&S s shares shouldn t fall much following the buyback, given that dismal trading news would reignite takeover speculation.

Dollar yields to reality

25 Oct 2004

The currency suffers from poor fundamentals. One new factor could be the conversion of petrodollars into petroeuros. That could be the trigger that brings the dollar through its alltime low of $1.42 to the euro.

Marsh sweeps Greenberg from office

25 Oct 2004

Given Marsh s triumvirate of regulatory failings, it would be a stretch to call this a bold move by the board. Marsh is now in a better position to negotiate a settlement with Spitzer. Unfortunately it will look like it has already given in to him. Spitzer made it easy without a new CEO the company faced criminal indictment. Marsh is playing it safe. It s chosen Spitzer s old boss. Spitzer made it easy without a new CEO the company faced criminal indictment. Marsh is playing it safe. It has chosen Spitzer s old boss.

What is Icelandair up to with Easyjet?

25 Oct 2004

Speculation is rife that the country s flag carrier could launch a full bid for the UK budget carrier. It s not clear whether it could afford to. And even if it could, Stelios looks an unlikely seller. But it is a wakeup call for management.

Goldman group bids £1.5bn for Warner Chilcott

25 Oct 2004

But the auction for the UK speciality drugs maker isn't over. Two more private equity consortia are still in the running. But £1.5bnplus can only be justified if Chilcott can continue its string of successful deals to replace its aging stable of drugs.

Lazard chairman provokes Wasserstein

22 Oct 2004

Michel DavidWeill approved Bruce Wasserstein s IPO plan with one big condition: the banker quit if it is not completed by June 30, 2005. Naturally, Wasserstein rejected the proposal, heightening tensions between the two men, which may further erode the IPO s chances.